My lender failed to pay my homeowners insurance on time and now I have no coverage – what now?

My lender failed to pay my homeowners insurance on time and now I have no coverage – what now?

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When you own a home with a mortgage, it’s likely your loan contract requires you to set-up an escrow account for homeowners insurance premium payments and levied property taxes. An escrow account is a way for your lender to charge you monthly for your estimated annual cost of insurance and taxes. This helps them keep track of and ensure taxes and insurance bills are paid on time, but it also gives you the benefit of spreading those amounts over 12 monthly payments rather than in one lump-sum when those bills come due. On the surface this can seem like a very lucrative offer – after all most escrow accounts don’t charge interest since payments are collected in advance of them becoming due, and you get to take advantage of any paid-in-full discounts your insurance company or your local tax collector may offer. So, what can go wrong?

An escrow account agreement is one that instructs your lender to pay your insurance premium on time, and well in advance, of your renewal date. Unfortunately, these accounts require someone from your mortgage company on the other end to process the renewal bill when received and set up payment to the insurance company from the escrow account. In many cases the lender will wait util the last minute to make payment, and some lenders even go further and take advantage of grace periods they “know” to be valid. I have personally been told over the phone by more than one escrow account representative that “we know this carrier offers an X-day grace period, so we’re good”. This process leaves little room for error, and in some rare cases can lead to the homeowner having their insurance cancelled entirely for the missed payment. If this is you, and you suffered from a higher rate, or an uncovered loss as a result of their failure to promptly pay your premium, you may be entitled to a refund for the difference in premium or even the ability to hold them liable for the any uncovered losses (provided coverage would have applied provided they paid the premium on time). Not only that, but per statute, they are responsible for any excess premium charged as a result of this for a period of 2 years.

In the 2021 Florida Statutes it clearly states the following:

Title XXXIII, Chapter 501, Section 137: 501.137 Mortgage lenders; tax and insurance payments from escrow accounts; duties.—

(1) Every lender of money, whether a natural person or an artificial entity, whose loans are secured by a mortgage on real estate located within the state and who receives funds incidental thereto or in connection therewith for the payment of property taxes or hazard insurance premiums when the funds are held in escrow by or on behalf of the lender, shall promptly pay the taxes or insurance premiums when the taxes or premiums become due and adequate escrow funds are deposited, so that the maximum tax discount available may be obtained with regard to the taxable property and so that insurance coverage on the property does not lapse.

(2) If an escrow account for the taxes or insurance premiums is deficient, the lender shall notify the property owner within 15 days after the lender receives the notification of taxes due from the county tax collector or receives the notification from the insurer that a premium is due.

(3)(a) If the lender, as a result of neglect, fails to pay any tax or insurance premium when the tax or premium is due and there are sufficient escrow funds on deposit to pay the tax or premium, and if the property owner suffers a loss as a result of this failure, then the lender is liable for the loss; except, however, that with respect to any loss which would otherwise have been insured, the extent of the liability shall not exceed the coverage limits of any insurance policy which has lapsed.

(b) If the lender violates paragraph (a) and the premium payment is not more than 90 days overdue, the insurer shall reinstate the insurance policy, retroactive to the date of cancellation, and the lender shall reimburse the property owner for any penalty or fees imposed by the insurer and paid by the property owner for purposes of reinstating the policy.

(c) If the lender violates paragraph (a) and the premium payment is more than 90 days overdue or if the insurer refuses to reinstate the insurance policy, the lender shall pay the difference between the cost of the previous insurance policy and a new, comparable insurance policy for a period of 2 years. If the lender refuses, the lender is liable for the reasonable attorney’s fees and costs of the property owner for a violation of this section.

(4) At the expiration of the annual accounting period, the lender shall issue to the property owner an annual statement of the escrow account.


This means that per Florida Statute, you may have some recourse.

Evolve Insurance Agency, LLC, it’s owners, officers and employees are not lawyers, and this should not be interpreted as legal advice. Should you have any questions regarding holding your lender liable for any negligent acts they may have committed, we suggest you contact a local attorney who is trained, licensed, and qualified to assist you with such an inquiry.

David Kronk,
Evolve Insurance Agency

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